In swing states, McCain and Obama spar over taxes

ST. LOUIS  In an outbreak of class warfare, John McCain and Barack Obama swapped sharply worded charges over tax cuts on Saturday, each accusing the other of shortchanging middle-income Americans at a time of economic hardship for millions.

McCain, trailing in the polls, fired the first volley, likening his rival to the socialist leaders of Europe and saying he wanted to "convert the IRS into a giant welfare agency, redistributing massive amounts of wealth at the direction of politicians in Washington."

McCain added, "Raising taxes on some in order to give checks to others is not a tax cut; it's just another government giveaway."

Obama responded a few hours later in an appearance before an enormous crowd on the banks of the Mississippi River, saying his Republican rival "wants to cut taxes for the same people who have already been making out like bandits, in some cases literally."

"John McCain is so out of touch with the struggles you are facing that he must be the first politician in history to call a tax cut for working people 'welfare,'" Obama said.

The exchange unfolded 17 days before an election that is trending Obama's way as he bids to become the nation's first black president.

McCain has become increasingly aggressive in debates, personal appearances and — in the past few days — automated phone calls as the polls showed him falling behind nationally as well as in several battleground states. Obama attacks his rival heartily, yet his rhetoric is backed by a late-campaign television advertising blitz that McCain has so far proven unable to match.

The candidates' itineraries underscored McCain's dilemma.

Obama spent the day in Missouri, a bellwether state that voted for President Bush in 2004. Campaign aides, citing local police, estimated 100,000 people turned out to hear him at the Gateway Arch in St. Louis on a sunny day, and another 75,000 turned out for a speech at dusk across the state in Kansas City.

McCain leveled his most critical rhetoric of the day in a paid weekly radio address, and he campaigned later in North Carolina and Virginia, a pair of traditionally Republican states he is struggling to hold. Aides estimated his North Carolina crowd at 4,000 to 5,000, a number he matched later in the day during an outdoor appearance in Woodbridge, Va.

The senator took the stage there to the theme song of "Rocky," a movie about an underdog and comeback fighter.

The differences between the two men on taxes have been present from the early days of the campaign, but lately they have attained greater prominence in the wake of a credit crunch, deep declines in the stock markets and rising joblessness.

McCain wants to retain all of the tax cuts that Bush won from Congress in 2001 and later years, reductions that applied at every level of income. For individuals, he also wants to raise the personal exemption for each dependent from $3,500 to $7,000, and has pledged to phase out the Alternative Minimum Tax, which falls on upper middle-class families.

Obama favors retaining Bush-era cuts except on taxpayers making more than about $250,000, whose taxes would revert to higher levels in effect a few years ago.

Like McCain, the Illinois senator advocates other cuts, including a tax credit of up to $500, depending on income. As part of his plan, millions of individuals and families who do not make enough money to pay income taxes would receive their cut in the form of a government check, known as a refundable tax credit.

McCain seized on that point as he attacked — even though he has proposed giving tax credits to those who pay no taxes as part of his health care plan. To finance those tax cuts, he proposes requiring workers to pay income taxes on the health benefits they receive from their employers.

"At least in Europe, the socialist leaders who so admire my opponent are upfront about their objectives," the Arizona senator said in his radio address. "They use real numbers and honest language. And we should demand equal candor from Sen. Obama. Raising taxes on some in order to give checks to others is not a tax cut; it's just another government giveaway."

Referring to Obama's pledge that he will cut taxes for 95 percent of all Americans, McCain said, "How do you cut income taxes for 95 percent of Americans, when more than 40 percent pay no income taxes right now? ... Since you can't reduce taxes on those who pay zero, the government will write them all checks called a tax credit."

He added: "In other words, Barack Obama's tax plan would convert the IRS into a giant welfare agency, redistributing massive amounts of wealth at the direction of politicians in Washington. I suppose when you've voted against lowering taxes 94 times, as Sen. Obama has done, a new definition of the term 'tax credit' comes in handy."

But Obama differed.

"It comes down to values in America. Do we simply value wealth, or do we value the work that creates it?" he asked.

"Sen. McCain wants to give the average Fortune 500 CEO a $700,000 tax cut but absolutely nothing at all to over 100 million Americans. I want to cut taxes — cut taxes — for 95 percent of all workers," he said.

"It's time to give the middle class a break," Obama said, "and that's what I'll do as president of the United States."

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Associated Press writer Glen Johnson contributed to this report from North Carolina.